M/S Daimond Steel v. State Of Up And 3 Others

Case snapshot

Sections / provisions: GST statutory provision - Section 7; GST statutory provision - Section 15; GST statutory provision - Section 61(3); GST statutory provision - Section 62; GST statutory provision - Section 67; GST statutory provision - Section 73; GST statutory provision - Section 74

Questions before the Court / Tribunal

• Issue and context: By means of the said writ petition, the petitioner challenges the order dated 03.06.2021 passed by the respondent no.3 as well as the order in appeal dated 13.07.2021 preferred against the order dated 03.06.2021. Operative disposition: Accordingly, the appellate order dated 13.07.2021 and the order dated 03.06.2021 challenged in Writ Tax No.4 of 2022 and the appellate order dated 13.07.2022 and the order dated 09.06.2021 challenged in Writ Tax No.5 of 2022 are
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

Court No. - 6 AFR Case :- WRIT TAX No. - 4 of 2022 Petitioner :- M/S Daimond Steel Respondent :- State Of Up And 3 Others Counsel for Petitioner :- Aloke Kumar Counsel for Respondent :- C.S.C. AND Case :- WRIT TAX No. - 5 of 2022 Petitioner :- M/S Daimond Steel Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Aloke Kumar Counsel for Respondent :- C.S.C. Hon'ble Pankaj Bhatia,J. 1. Both the said writ petitions arise out of the similar proceedings against the petitioner, although in respect of the different financial years. 2. For the sake of brevity, the facts of Writ Tax No.4 of 2022 are being recorded. 3. By means of the said writ petition, the petitioner challenges the order dated 03.06.2021 passed by the respondent no.3 as well as the order in appeal dated 13.07.2021 preferred against the order dated 03.06.2021. 4. The facts in brief are that the petitioner is a partnership concern and is duly registered with the GST Department. The petitioner claims that all the inwards and outwards supply was duly reflected on the portal of the department and the petitioner uploaded the supply made by him in GSTR-1 and after claiming the Input Tax Credit as reflected in GSTR-2A, filed his return in the form of GSTR-3B claiming the benefit of Input Tax Credit. It is argued that the returns filed were accepted and were never questioned and no proceedings were initiated in the case of the petitioner.

On 08.01.2021, the respondent no.3 issued a notice under Section 74 of the UPGST Act for the period July, 2017 to March, 2018 (Annexure-7 to the writ petition). It is argued that in the said notice, the date for filing the reply was mentioned as 22.01.2021 and, the date and the time for personal hearing was also mentioned as 22.01.2021 but the venue of personal hearing was not disclosed as is clear from the perusal of the notice (Annexure-7). Alongwith the said show cause notice, the petitioner was also supplied with the summary of show cause notice dated 08.01.2021 in the form of GST DRC-01 (Annexure-8). 7. It is argued that in the show cause notice, in the column indicating the brief fact of the case “Adverse material found in SIB” was mentioned and in the column of grounds for issuance of the show cause notice, it was again mentioned that “Adverse material found in SIB”.

The petitioner further argues that yet another notice was issued calling upon the petitioner to submit reply by 24.12.2020. In the said notice also, the report of the SIB was mentioned. It is argued that in all the notices, there is a reference to the SIB report, which was the

foundation for issuance of the notice under Section 74, however, the said report was never supplied to the petitioner. Despite that, the petitioner submitted his reply on 08.01.2021. It is specifically alleged that neither at the time of issuance of show cause notice nor on the date of hearing any evidence whatsoever was adduced against the petitioner, even the SIB reply was never produced, however, an order came to be passed on 03.06.2021 under Section 74 of the UPGST Act wherein the demand of tax and penalty was quantified against the petitioner at Rs.14,84,099.82/-. He draws my attention to the order passed under Section 74, wherein on the basis of the SIB report and the documents referred therein as well as some ex-parte submission by the department wherein it had claimed that 20% profit should be deemed to be appropriate, as against which, the Assessing Authority was of the view that even under the Income Tax Act, 1961, 8% profit would be an appropriate estimate and on the said basis quantified the demand and penalty against the petitioner.

The petitioner preferred an appeal against the said order on various grounds. The appellate authority decided the appeal and partly allowed the same. While allowing the appeal held that on the basis of the provisions of the Income Tax Act, the manner of assessment done by the adjudicating authority cannot be justified, however, without disclosing any basis, whatsoever, quantified the tax and penalty at Rs.9,30,969.60/-. The said order is under challenge before this Court as the Appellate Tribunal has not yet been constituted. 8. The contention of the Counsel for the petitioner Sri Aloke Kumar is that for invoking the powers under Section 74, it is essential that all the documents proposed to be relied upon should be provided, which has not been done in the present case.

Appellant / petitioner / assessee submissions

It is clear in the present case that department has taken recourse to Section 74 for assessing the demand of tax and penalty leviable. 13. The sole basis for issuance of the show cause notice under Section 74 was the SIB report, which finds mention in the notice as well as the additional notice served upon the petitioner. No material in the form of the SIB report was ever supplied to the petitioner as is contended by the petitioner specifically in the writ petition in paragraph 31. Although in the counter affidavit, it has been stated that the SIB report was never demanded by the petitioner, however, on the request of the assessee, the same was given at the time of assessment proceedings and he had submitted a return reply against the said report.

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

which he was required to pay. He further argues that from the perusal of the order of the adjudicating authority as well as the appellate authority, it is clear that while adjudicating the issues, the department has assessed the demand and penalty on the basis of the best judgment assessment which is possible only when recourse is taken to Section 62 and the said best judgment assessment procedure is neither prescribed nor contemplated under Section 74. 9. The Counsel for the petitioner further argues that the recourse to the guidelines issued to the Income Tax Authorities cannot be invoked for completing the assessment as has been done by the adjudicating authority.

Operative decision and relief

The adjudicating authority clearly erred in assessing and quantifying the demand and levying the penalty by taking recourse to some guidelines issued by the Income Tax Authorities which is impermissible while determining the tax liability under Section 74. The order of the appellate authority is even further bad in law as it discloses no reason, whatsoever for assessing the tax and quantifying the liability. While on the one hand, the appellate authority disapproved the manner in which the adjudicating authority had assessed and quantified the demand of tax and penalty, in the same breath, he proceeds to quantify the tax and imposed penalty without disclosing any reasons whatsoever. 16. On the perusal of the adjudicating authority’s order as well as the appellate order, the manner in which the demand has been raised and quantified is not in consonance with the mandate of Section 74 and thus on the ground alone, impugned appellate orders as well as the adjudicating authority’s orders are liable to be quashed.

17. Accordingly, the appellate order dated 13.07.2021 and the order dated 03.06.2021 challenged in Writ Tax No.4 of 2022 and the appellate order dated 13.07.2022 and the order dated 09.06.2021 challenged in Writ Tax No.5 of 2022 are quashed. 18. Both the writ petition stand allowed. 19. Any amount deposited by the petitioner shall be refunded to the petitioner on his moving an appropriate application in accordance with law. Order Date :- 06.04.2023 akverma (Pankaj Bhatia, J)

Ratio and legal principle

The narrow proposition associated with M/S Daimond Steel v. State Of Up And 3 Others concerns issue and context: by means of the said writ petition, the petitioner challenges the order dated 03.06.2021 passed by the respondent no.3 as well as the order in appeal dated 13.07.2021 preferred against the order dated 03.06.2021. operative disposition: accordingly, the appellate order dated 13.07.2021 and the order dated 03.06.2021 challenged in writ tax no.4 of 2022 and the appellate order dated 13.07.2022 and the order dated 09.06.2021 challenged in writ tax no.5 of 2022 are The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in WRIT TAX No. - 4 of 2022.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Disposed” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: Issue and context: By means of the said writ petition, the petitioner challenges the order dated 03.06.2021 passed by the respondent no.3 as well as the order in appeal dated 13.07.2021 preferred against the order dated 03.06.2021. Operative disposition: Accordingly, the appellate order dated 13.07.2021 and the order dated 03.06.2021 challenged in Writ Tax No.4 of 2022 and the appellate order dated 13.07.2022 and the order dated 09.06.2021 challenged in Writ Tax No.5 of 2022 are Its practical value lies in the way the Allahabad High Court connected the governing provisions—GST statutory provision - Section 7; GST statutory provision - Section 15; GST statutory provision - Section 61(3); GST statutory provision - Section 62; GST statutory provision - Section 67; GST statutory provision - Section 73; GST statutory provision - Section 74—to the procedural posture and evidence before it.

The authority level is High Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of GST statutory provision - Section 7; GST statutory provision - Section 15; GST statutory provision - Section 61(3); GST statutory provision - Section 62; GST statutory provision - Section 67; GST statutory provision - Section 73; GST statutory provision - Section 74 and the decision date 2023-04-06; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

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Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is M/S Daimond Steel v. State Of Up And 3 Others, the proceeding is WRIT TAX No. - 4 of 2022, and the decision is dated 2023-04-06. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as Pankaj Bhatia,J.. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with GST statutory provision - Section 7; GST statutory provision - Section 15; GST statutory provision - Section 61(3); GST statutory provision - Section 62; GST statutory provision - Section 67; GST statutory provision - Section 73; GST statutory provision - Section 74. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Disposed. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_SUBSEQUENT_TREATMENT_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• GST statutory provision - Section 7 — apply the exact version considered in the judgment.
• GST statutory provision - Section 15 — apply the exact version considered in the judgment.
• GST statutory provision - Section 61(3) — apply the exact version considered in the judgment.
• GST statutory provision - Section 62 — apply the exact version considered in the judgment.
• GST statutory provision - Section 67 — apply the exact version considered in the judgment.
• GST statutory provision - Section 73 — apply the exact version considered in the judgment.
• GST statutory provision - Section 74 — apply the exact version considered in the judgment.

Case network

• M/s Technosys Integrated Solutions Pvt. Ltd. v. Union of India and Others — Delhi High Court · Disposed
• M/s SA Aromatics Pvt. Ltd. and Another v. Union of India and Others — Allahabad High Court · Disposed
• M/s Soraza Recycling Private Limited v. Union of India and Others — Allahabad High Court · Disposed
• M/S Pawan Kumar Jain And Company v. State Of U.P. And 2 Others — Allahabad High Court · Disposed

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